Pain at the pump

Tue, 2007-11-27 16:41

It's no secret that diesel prices are reaching new highs. The real unknown here, though, is how the trucking industry as a whole can deal with this huge and ever-expanding bulge in its bottom line for the long term.

I mean, when oil prices hit $75 a barrel in the wake of Hurricane Katrina back in 2005, you would've thought the end of the world arrived from the way the general media covered the resulting run-up in diesel and gasoline prices. Today, however, the price per barrel is near the $100 mark, with diesel and gasoline pump prices hitting all-time records -- above even those set in 1981, adjusting for inflation, when the nation sat mired in a major recession.

On average in the U.S. now, diesel fuel costs just over $3.44 per gallon, with the pump numbers going higher and lower in different parts of the country. Truckers in Wisconsin report $3.58 per gallon -- one lucky trucker who phoned into "The Loading Dock" trucking news show on Sirius Satellite Radio's channel 147 scored $3.42 in California of all places (where fuel prices are usually way above the national average).

The price run up of the last few weeks happened so fast than many carriers and owner-operators alike couldn't revise their fuel surcharges upwards quickly enough, thus having to eat many dollars during the lag time. And with fuel representing 25% of a carrier's bottom line operating cost on averge, according to the American Trucking Association (ATA), a lag in fuel surcharge adjustment adds up to big money in a hurry.

Just look at the industry's escalating fuel bill over the last several years. In 2004, trucking paid $65.9 billion for fuel, according to ATA's statistics. By 2005, that bill climbed to $87.7 billion -- a ONE YEAR spike of $19.8 billion! In 2006, fuel costs jumped to $103.3 billion -- another double-digit spike, this time to the tune of $15.6 billion -- and now trucking is on track to spend $110.1 billion on fuel in 2007. IF we hold steady at that $3.44 per gallon average, mind you.

Talking to truckers on the air, you can plainly hear their frustration. Owner-operators that spent $400 to $500 a week on fuel seven years ago now face a staggering $1,600 to $1,700 weekly fuel bill -- even if they are getting a solid 6.5 mpg on the highway. That type of expense would blow a hole in anybody's wallet quickly -- especially if freight revenues are slack, like they are now. And it's no wonder that the talk is turning (yet again) to holding a nationwide trucker's strike -- this time being called for Jan. 3 through 8 in 2008.

What can be done? It's beyond obvious that the U.S. lacks anything that even remotely can be labeled an energy security strategy -- we've gone through nothing but cycle after cycle of fuel price spikes since 1999, when diesel cost (can you believe it?) 90 cents a gallon. Yes, that number is from the late 20th century folks ... though it seems like a lifetime ago.

Making your trucks as fuel efficient as possible (adding aerodynamic roof and fuel tank fairings, reducing engine idling, making sure ALL 18 tires are properly inflated, running the engine in the 'sweet spot' on the highway) is of course the standard reply. Reducing out-of-route mileage, using a fuel buying strategy, and other management tactics are all there for the taking, too. But the reality is trucks need to roll -- and petroleum is really the only fuel of choice, representing some 97% of what's burned in truck tanks today. Until we get some alternatives out there in some big numbers, we're stuck with petroleum -- and all the price hikes that go with it.